Apr 18, 2019

RAND Report Outlines Cost Concerns to California’s 2030 Hospital Seismic Law

  1. California’s hospitals are among the safest buildings in the world today.
    • Safety is the highest priority for hospitals. California hospitals have invested billions of dollars and decades of work to upgrade or replace our facilities to ensure that our patients, employees and visitors will be safe when the next earthquake strikes.
    • As a result, all hospital buildings in California will be able to withstand a major earthquake by 2022. This means that within three years all hospitals will have achieved the highest level of safety possible for patients, employees, and visitors alike.
  1. Now that our buildings are safe, it’s time to turn our attention to how we will care for patients after an earthquake occurs.
    • After the 1994 Northridge Earthquake, in which 11 hospitals were damaged and eight were evacuated, state lawmakers enacted SB 1953, which aims to improve hospital resilience to seismic events.
    • The current regulations – written 25 years ago – require every hospital building in the state to remain operational after a major earthquake by January 1, 2030. If hospitals don’t meet that deadline, they will be forced to close.
    • The very law that is intended to ensure people have access to care after an earthquake strikes may, in fact, force some hospitals to shutter even before the next earthquake happens.
    • The current requirements were developed in a different era. Back then, people communicated by snail mail and fax, Facebook didn’t exist and we didn’t have iPhones. Today, new technologies and outpatient delivery models enable many patients to receive their care outside of the hospital setting.
  1. A new report by the RAND Corporation finds that the 2030 seismic requirements may cost billions of dollars and result in more than half of all hospitals in the state facing financial distress.
    • The RAND Corporation recently completed its third comprehensive look at California’s hospital seismic mandate since 2002. Like the two previous studies, this report confirms the enormous cost of meeting the current seismic requirements — estimated to be up to $143 billion if every hospital building has to be rebuilt. The price tag may even be higher when financing and other costs are factored in.
    • As the study notes, hospitals bear the entire financial burden for the required upgrades. According to the RAND report, 34 percent of all hospitals are currently in some form of financial distress. That could rise to more than 50 percent of hospitals if the current requirements are not modified.
    • According to the RAND report, the financial impacts stemming from the current requirements may lead to reduced hospital capacity, reduction of service lines, or outright closure of some hospitals across the state.
  1. Lawmakers can take a giant step forward in making health care more affordable by considering policy alternatives to the 2030 hospital seismic mandate.
    • While the RAND report doesn’t make specific policy recommendations, it does suggest that lawmakers investigate policy alternatives that may more effectively balance the public benefits of seismic safety with the financial burden imposed by the current law.
    • California’s hospitals are working collaboratively with lawmakers and stakeholders to develop policy options that ensure disaster victims have rapid access to life-saving care while also making care more affordable and preventing the premature closure of some hospitals.